Evaluating Portfolio Performance with Stochastic Discount Factors
AbstractThe authors first discuss performance evaluation using stochastic discount factors and relate it to traditional mean-variance analysis. They then use Monte Carlo experiments to examine the properties of various general method of moment (GMM) estimators. The test statistics are fairly well behaved although serious size distortions are found in some cases. The simulations also show that a significant excess return, or a long sample, is needed to reject neutral performance. Finally, the authors offer an evaluation of Swedish-based mutual funds. The conditional evaluation indicates that funds have had nonneutral performance as revealed by the predictability of the unconditional performance measure. Copyright 1999 by University of Chicago Press.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 72 (1999)
Issue (Month): 3 (July)
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Other versions of this item:
- Dahlquist, Magnus & Söderlind, Paul, 1997. "Evaluating Portfolio Performance with Stochastic Discount Factors," CEPR Discussion Papers 1663, C.E.P.R. Discussion Papers.
- Dahlquist, Magnus & Söderlind, Paul, 1997. "Evaluating Portfolio Performance with Stochastic Discount Factors," Working Paper Series in Economics and Finance 175, Stockholm School of Economics, revised 01 Sep 1998.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
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